European inflation hits 10.7% and gold is on the longest monthly decline since 1968

The last day of October is ripe with terrifying news, and it has nothing to do with Halloween.

In Europe, it was just reported that preliminary data from Europe’s statistics office revealed that headline inflation came in at an annual 10.7% this month. CNBC said, “This represents the highest ever monthly reading since the euro zone’s formation. The 19-member bloc has faced higher prices, particularly on energy and food, for the past 12 months.”

Inflation Soars in Europe

The article also said that Preliminary data on Monday from Europe’s statistics office showed headline inflation came in at an annual 10.7% this month. This represents the highest-ever monthly reading since the euro zone’s formation. The 19-member bloc has faced higher prices, particularly on energy and food, for the past 12 months. But the increases have been accentuated by Russia’s invasion of Ukraine in late February.”

Energy costs for example are expected to have the highest annual rise in October coming in at 41.9% an increase from September’s energy inflation which came in at 40.7% in the prior month. Food, tobacco, and alcohol prices also increased from 11.8% on September 2 to 13.1% in October.

Some countries in the Eurozone have exceeded even 10% inflation with Italy’s inflation rising above 12% this month. France reached only 7.1%, however, Germany acknowledged that inflation had hit 11.6%. Although the average is just below 11% Estonia, Latvia and Lithuania saw an inflation peak above 20% in October.

High Inflation Means Higher Rates

This news will certainly result in the European Central Bank dramatically pivoting from its current monetary policy to a much more aggressive monetary policy including larger rate hikes in the upcoming months to try to curtail spiraling inflation in Europe.

The Federal Reserve’s November FOMC meeting begins on Tuesday and concludes on Wednesday. The conclusion will be followed by the release of the FOMC statement along with a press conference by Chairman Jerome Powell. It will likely include another 75-basis point interest rate hike and a more hawkish tone than previously seen by members of the Federal Reserve.

Higher Rates Mean a Stronger Dollar and More Pain for Gold

All of this news has bled into the price of gold taking it lower. With the end of October at hand traders and market participants have witnessed something not seen since 1982 which is seven consecutive months in which gold has closed lower. This is certainly a dramatic selloff that could continue as long as central banks raise rates and in the United States, the dollar stays strong. As of 5:50 PM, EDT gold futures basis most active December contract is down $8.40 and fixed at $1636.40.

Wishing you as always good trading and good health,